US independent refiner Tesoro is ramping up its criticisms of a proposed border adjustment tax and rebuffing Republican attempts to soften refinery sector opposition.
The criticisms from Tesoro, which operates seven refineries with a combined capacity of 895,000 b/d, adds to the difficulties US House Ways and Means committee chairman Kevin Brady (R-Texas) may face in getting his plans for a comprehensive tax overhaul enacted. Brady's staff has been meeting with refiners to hear their concerns and discuss a transition period, but a Tesoro executive today said concessions are unlikely to make a difference.
"Fundamentally we are opposed to it," Tesoro government affairs vice-president Stephen Brown said. "We do not see any particular value to try to negotiate around it, do not see any benefit to negotiate a transition around it because we have a philosophical argument that it goes against free market principles."
Republican leaders in the US House of Representatives have pitched the border adjustment tax a key part a plan to cut corporate tax rates to 20pc from 35pc. The proposal would prevent corporations from taking a tax deduction on imports and remove taxes on exports, raising an estimated $100bn/yr that can pay for tax cuts, but critics worry it would raise the price of gasoline, diesel and other goods.
Brown said the border adjustment tax would effectively require its customers to pay for a corporate tax cut while dampening demand for gasoline and diesel. Republican supporters say the tax would strengthen the dollar, avoiding domestic price increases. But critics remain skeptical whether the currency changes would materialize.
US energy company Koch Industries came out in opposition to the border tax in December and backed a study that projected it would raise US gasoline prices by 30¢/USG. Koch subsidiary Flint Hills Resources operates 580,000 b/d of US refining capacity running imported Canadian and other crude supply.
Oil industry groups and refining executives have raised concerns about the tax but have not yet taken a formal position, in part because they are waiting for an actual legislative proposal. Phillips 66 chief executive Greg Garland said the company supports tax reform but considered early forms of the proposal an overall cost for the independent refiner, chemicals and midstream company.
"You should not pick winners and losers with your tax policy," Garland said in an earnings call.
US refinery group American Fuels and Petrochemicals Manufacturers president Chet Thompson has said that refiners have "serious concerns that a border adjusted tax could have considerable impacts on the industry, consumers and the economy."
